by Jayne O'Donnell and Annika McGinnis, USA TODAY

by Jayne O'Donnell and Annika McGinnis, USA TODAY

So few insurers offer plans on some of the new government health insurance exchanges that consumers in those states may pay too much or face large rate increases later, insurance experts say.

An average of eight insurers compete for business in 36 states that had exchanges run or supported by the federal government last month, the Department of Health and Human Services says. (Idaho has since started its own exchange.) But just because an insurer sells in a state, it doesn't mean it sells in every area of a state so many residents have far fewer options.

Many state-run exchanges also have far fewer than HHS' average, which is weighted based on the number of uninsured residents in an area. Vermont has two, Kentucky has three and Nevada and Maryland each have four.

Some insurers pulled out of the exchanges required by the Affordable Care Act as the Oct. 1 launch approached. That leaves an uneven patchwork of providers - ranging from one insurer in New Hampshire and West Virginia to 16 in New York.

The difference also leads to a wide disparity in the numbers of plans, from just seven in Alabama to 106 in Arizona, according to HHS' analysis. But HHS spokeswoman Joanne Peters says the situation is still much better than it was before the law took effect.

"In the past, consumers were too often denied or priced out of quality health insurance options, but thanks to the Affordable Care Act consumers will be able to choose from a number of new coverage options at a price that is affordable," she said in an e-mail.

About a third of insurance companies opted out of participating in the exchanges in states where they were already doing business, according to a recent report by McKinsey & Co. About half of states - which include about a third of the non-elderly insured population - will see a "material decline" in competitors, says McKinsey, while the other half of states will have about the same or more insurance choices on the exchanges.

"When there are too few carriers, down the road there will be issues with rate increases that make plans unaffordable for average Americans even with rate subsidies," says Bryce Williams, managing director of Towers Watson Exchange Solutions, which operates private insurance exchanges for companies. "We need competitive insurance markets in all states (and) multiple carriers competing hard."

Williams notes that most counties have five to seven insurance companies competing on Medicare plans. Competition on their exchange has held down costs and kept annual rate increases to less than 2.8% a year, he says.

Provisions in the law, such as those that prohibit cost sharing or deductibles for preventive care, help level the playing field between states with and without a large number of insurers, some say.

"The quality will be comparable because they have to meet a minimum threshold (for) the basics of the plans," says Georgetown senior research fellow Sabrina Corlette. "It's really around the pricing that competition can play a role."

Mary Chalmers, 62, lives in rural California where she just has two plans to choose from even though California has 12 insurers participating on the exchange. The same "silver" plan costs $62 more a month in her hometown of San Luis Obispo than in Los Angeles. Thanks to a subsidy, however, the self-employed investor's premium for an individual policy will drop from the $467 she pays now a month to about $100 a month.

States with just a few providers "definitely lose the competitive effect of carriers competing against each other to drive down those costs," agrees David Cusano, also a senior research fellow at the Georgetown University Health Policy Institute.

Corlette says insurers' decision are motivated by profits.

"Serving the public is not part of their mission. â?¦ They're crunching the numbers and looking at tightening profit margins," she says. "Part of that is a result of the Affordable Care Act, basically telling these insurance companies that your insurance model to attract healthy people and keep out sick people is no longer allowed."

Some insurers' approaches:

â?¢ Aetna. In May, Aetna acquired Coventry Health Care, which also had filed plans for some of the exchanges. Aetna dropped out of some states where Coventry filed plans and the reverse was true in other states.

On a combined basis, Aetna and Coventry plans will be available on a statewide basis in 10 state exchanges and in limited geographic areas in seven state exchanges. Spokesman Matthew Wiggin says the company "narrowed in on those states where we had the right cost structure and network arrangements to meet the specific demographic needs of exchange consumers." The result, he says, is the company's presence will deliver "long-term profitable growth.

â?¢ Cigna. The company is selling plans on five exchanges - those in half of the states in which it sells individual plans. Spokesman Joseph Moody notes that while Cigna is a "national leader in employee health plans," it only started selling plans to individuals in the last four to five years.

â?¢ HealthNet. Although it's one of the only major insurance providers that has been losing money in recent years, HealthNet is taking a different approach, offering the cheapest rates - sometimes by 25% - in Southern California, said company spokesman Brad Kieffer. HealthNet expects to see 19.4% growth in revenue in 2014, a huge jump from 2011, when growth shrank 16.2%.

In New Hampshire, the exchange has just Anthem Blue Cross and Blue Shield, which greatly reduces the number of hospital options, says State Sen. Andy Sanborn. Since more than 90% of doctors are affiliated with specific hospitals, the new plans will also exclude many doctors, he added.

Plans don't include the capital's Concord Hospital, and the next-closest hospital uses Concord doctors, Sanborn said. So, he said, people will have to drive to a third hospital an hour away. They'll even have to call an ambulance from a far-away hospital to pick them up, he said.

"There's an absolute outcry of people at this point," he said.

In West Virginia, where there is also only one provider, Highmark Blue Cross Blue Shield submitted its rates "long before" it knew the competition, spokeswoman Kristin Ash wrote in an e-mail. Prices were based on regulations and company experience, she wrote.

Some insurers said they dropped out of exchanges due to uncertainty. For Aetna, the new law could be "materially adverse," the company wrote in its second-quarter SEC filing, mentioning the new Medicare requirements, individual coverage mandate, rating limits and new fees and assessments. In states that didn't expand Medicaid, enrollment could also drop, Aetna wrote.

Carriers are "really worried" about a sicker population purchasing plans and driving down profits, Cusano said.

West Virginia, with its single insurer, ranks 47 out of 50 in terms of health, according to the 2013 America's Health Rankings Senior Report.

Companies also may have left because of tougher regulations on pricing, quality, transparency and more, especially in state-run exchanges such as Maryland, Oregon and Rhode Island, Cusano said. Williams says New Jersey, which only have three insurers, has some of the toughest regulations in the country for insurers - and much higher rates than in nearby New York.

Companies doing well tended to be more conservative. Aetna and United Health Care, which have both pulled out of several exchanges, both enjoyed strong revenue growth last year. The companies expect to continue their growth through at least 2014, a trend Cusano said could be due to larger markets and enrollment increases because of Medicaid expansion.

As some larger insurers left certain marketplaces, companies that used to serve only the Medicaid market may move in - a trend already seen in states including Rhode Island and Oregon, Corlette said.

The number of companies participating in exchanges may also grow - or deplete - after insurers see what theirs and other companies' experiences have been.

"It is too early to speculate on 2015, but we will use our experience in 2014 to help inform our exchange strategy for 2015 and beyond," says Aetna's Wiggin.